LTCG vs STCG Tax Rules in India: Tax Harvesting & Exemption Limits Explained
Renjith Pillai
Senior Systems Architect & Financial Analyst
Understanding capital gains tax regulations is crucial for optimizing your net investment yields. A well-planned tax harvesting strategy can save thousands in income tax every year.
Equity Capital Gains Taxation Breakdown
For listed Indian equity shares and equity-oriented mutual funds (where equity exposure exceeds 65%):
- Short-Term Capital Gains (STCG): Applicable if equity investments are redeemed within 12 months. Taxed at a flat rate of 20% on capital profits.
- Long-Term Capital Gains (LTCG): Applicable if held for more than 12 months. Gains up to ₹1.25 Lakh per financial year are 100% tax-exempt. Gains above ₹1.25 Lakh are taxed at 12.5% without indexation benefits.
What is Tax Loss & Gain Harvesting?
LTCG Tax Harvesting is the practice of selling equity mutual fund units or shares at the end of each financial year to realize up to ₹1.25 Lakh in long-term capital gains tax-free, and then immediately reinvesting the proceeds back into the same or similar fund. This resets your purchase cost basis higher, effectively eliminating future accumulated tax liability on those gains.
Frequently Asked Questions
Can I set off short-term capital losses against long-term gains?+
How are debt mutual funds taxed in India?+
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Senior Software Engineer & Network Specialist
Renjith Pillai is a senior software engineer and financial tools author with over 12 years of experience. He built EasyCalcs.in to provide high-precision, privacy-first technical tools and financial calculators for investors, engineers, and consumers.